Ch. 10 - Time Value of MoneyWorksheetSee all chapters
All Chapters
Ch. 1 - Introduction to Accounting
Ch. 2 - Transaction Analysis
Ch. 3 - Accrual Accounting Concepts
Ch. 4 - Merchandising Operations
Ch. 5 - Inventory
Ch. 6 - Internal Controls and Reporting Cash
Ch. 7 - Receivables and Investments
Ch. 8 - Long Lived Assets
Ch. 9 - Current Liabilities
Ch. 10 - Time Value of Money
Ch. 11 - Long Term Liabilities
Ch. 12 - Stockholders' Equity
Ch. 13 - Statement of Cash Flows
Ch. 14 - Financial Statement Analysis
Ch. 15 - GAAP vs IFRS

Concept #1: Time Value of Money and Using Timelines

Concept #2: Time Value of Money Equation: Future Value

Practice: The formula FV = PV * (1 + r)n is best used for:

Practice: You invest $4,545 in Clutch Bank today earning a juicy 10% annual interest. What is the value of your investment in one year? What is the value of the investment after two years?

Practice: The formula PV = FV (1 + r)n is best used for:

Practice: You are saving up $12,000 for a luxurious European vacation two years from now. How much money would you need to invest today at Clutch Bank, earning their juicy 10% annual interest, to have enough for your vacation? How much would you need to invest today, if instead you could only earn 6% interest?

Example #1: Time Value of Money

Practice: Today, you purchased a $1,000 bond that matures in 5 years. The bond pays annual interest of 10%. Visualize these cash flows on a timeline.